The United States is facing a financial health crisis.
The majority of Americans struggle to save, spend, borrow, or plan in ways that allow them to recover successfully from challenges or take advantage of opportunities to improve their circumstances. According to the Financial Health Network, as of May 2021, a staggering 66% were not financially healthy. Fifty-two percent (131 million people) were coping and 14% (35 million people) were vulnerable.
That’s 166 million people who are struggling with their financial lives.
It’s 166 million people who have to spend more than they make. Who have unmanageable debt and aren’t confident their insurance policies will cover them in an emergency. Who have sub-prime credit scores and can’t pay all their bills on time. It’s 166 million people who don’t have enough savings to cover three months of living expenses.
Exploring Financial Fragmentation
To support their financial health, 80% of consumers expect their primary financial institutions to help. Unfortunately, only 14% feel they’re getting the help they need.
This gap in expectations has left the door open for financial fragmentation.
Instead of turning to their primary financial institution, consumers are now looking to fintechs and challenger banks like Venmo (which processed $159 billion in total payment volume in 2020, a 59% year-on-year increase) and Chime (which has over 13 million customers, 8 million of which use Chime as their primary bank). It’s not uncommon for consumers to use between 20 and 30 different financial apps and services.
The result of financial fragmentation: people don’t have a wholistic, objective view of their financial health.
Fighting Fragmentation to Improve Financial Health
One way for banks and credit unions to mitigate the financial health crisis is to fight financial fragmentation.
This is vital now and will only become more important in the future – as accountholders get more used to digital banking; personalized anytime, anywhere support; and modern conveniences like end-to-end lending, real-time payments, and digital account opening.
When financial institutions offer banking tools that are useful, relevant, seamless, and appropriately simple – while creating new value and helping people make sense of their money – people will have no need to look elsewhere for services. And when the FI once again becomes the single source of truth for their accountholders, they can implement financial health strategies that guide people toward financial wellness.
Connecting Possibilities
With Jack Henry’s powerful and integrated technology, institutions can connect accountholders with the tools they need in their day-to-day lives to fight financial fragmentation and develop a financial health strategy to support financial wellness.
Visit jackhenry.com to learn how you can mitigate the financial crisis one person at a time.